Dutch Lady sets RM1b target

Dutch Lady Milk Industries Bhd (3026) hopes to reach the RM1 billion revenue mark within three years or earlier, its top official said.

This will be achieved through a combination of innovation, brand differentiation and by promoting more dairy consumption.

In the financial year ended December 31 2009, Dutch Lady posted a revenue of RM691.85 million and a net profit of RM60.4 million.

It is now the market leader in Malaysia, commanding 19 per cent of the dairy market.

Managing director Sebastian van den Berg said that the RM1 billion goal may be reached even earlier.
"We hope (to touch RM1 billion) it is shorter than three years," van den Berg said.

In a recent interview with Business Times, the recently-appointed country head said the dairy market in Malaysia is now growing at about 10 per cent a year.

"We hope to grow faster than the market at about 10 per cent to 15 per cent year-on-year," he said.

According to marketing director Rahul Colaco, the infant and child nutrition, which represents 60 per cent of sales and liquid milk representing 30 per cent of total revenue, will drive growth.

The remaining 10 per cent will be from its Completa condensed milk and juice under the Joy brand.

"We are producing for our loyal customers. We are not putting focus on this (but) we have no divestment plans," he said.

Its focus is to drive consumption and sales through the promotion of the nutritional value of dairy.

Malaysians consume about 25 litres of dairy per person annually as compared with 70 to 120 litres in Europe.

"There is big room for growth and we are enlarging the market compared with fighting for it with others," he said.

A major portion of its advertising and promotional budget, which will be a fifth more than in 2009, will go towards promoting dairy particularly its UHT and growing-up milk category.

Dutch Lady, meanwhile, does not expect to raise the price of its products at least until August 2010 although the price of skimmed milk powder, the main dairy raw material continues to rise.

The price of this commodity is expected to rise to over US$3,000 per tonne compared with US$2,100 in the fourth quarter of 2009.

On its part, Dutch Lady will cut cost by improving on its assortments and factory efficiency.

Also in its favour is Dutch Lady's parent which is the ?9 billion FrieslandCampina group. Due to its sheer size and buying power, it is able to leverage and cope better with price fluctuations.

Friesland-Campina is the dairy co-operative owned by 16,000 farmers across Belgium, Germany and the Netherlands.

Dutch Lady in Malaysia, the only unit of the group which is listed on a stock exchange, also does its bit to help local dairy farmers.

It is working with the Malaysian Veterinary Department for the transfer of technology and knowledge.

Dutch Lady buys some 10 million litres of fresh milk from local farmers at a guaranteed price of RM2.20 a litre, a premium over what it would be paying in the market at RM1.50 per litre.

By Vasantha Ganesan